Jeffrey Saut: How to Play this Market

Also, Is Mexico the Next China for U.S. Imports?

Jeffrey Saut, Chief Investment Strategist at Raymond James, spoke with Financial Sense Newshour today to offer some perspective on the markets with a few key insights from their latest institutional investor conference.

Over the four decades he’s been in the business, Jeff says the current bull market is “the most hated stock rally I’ve ever seen”, with the world “profoundly underinvested in U.S. equities.”

When asked what the general feeling was from the roughly 800 portfolio managers and 300 companies that attended their recent conference, he says many are suffering from performance anxiety as the professional investment community struggles to keep up with the market.

Should we expect a correction soon?

Jeff says typical “buying stampedes” like this one last 17-25 sessions before exhausting themselves. Whereas a few have lasted 25-30, over the past fifty years you can count them on one hand. Currently, this market is in its 57th such session, with the longest before that at 53. Thus, he says, expect a 5-7% pullback coming soon.

Do you think this will be a major market top?

Citing Dow Theory, Jeff says that with both Dow averages hitting new all-time highs, the upward trend in the stock market is intact and “we have the potential to be in a new secular bull market here with a lot longer left to run.”

How much longer?

Given that we are in the fourth year of this bull market, Jeff says “If you go back and count the number of rallies that have lasted four years or more, without so much as a 20% correction, you find that the average length extends another 2.3 years for a total duration of 6.3 years.”

Perhaps the most interesting point he made in the interview was his belief that Mexico will be the next China for U.S. exports. With U.S. companies able to raise money in the debt markets cheaper than their cost-of-capital, there’s “no reason to build a plant in China” anymore. He says one way to play this long-term theme is through railroads, especially one he cites running from Mexico straight into the U.S.

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